There are two fundamental elements for sustainable business success:
- A product that people want.
- A commercial model based on a value exchange between buyer and seller such that a “win-win” is created.
The rest, important as it may be, is largely made up of process and people.
Facebook clearly ticks the first box as demonstrated by its 2 billion users, but last week it hit the buffers – hard – with the second box. Ongoing revelations regarding Facebook’s involvement in the workings of Cambridge Analytica, so brilliantly exposed by Channel 4 news, has demonstrated on a mass scale the darker side of “big data” and its unholy alliance with our attention. And our attention is the great currency of the advertising world – hence the term the “attention economy”.
Privacy Abuse: The Big Problem with Advertiser Funded Media Content & Services
Mass media businesses have for decades provided subsidised, or free, entertainment and information to people in return for advertising. Businesses paying to influence our behaviour, in other words. But we all knew the score – on TV we could watch the adverts, skip them or ignore them. In newspapers we could concentrate on the news or turn the page. Sometimes, though, we might even enjoy the advertising and happily be moved to make a purchase. But it’s usually a conscious decision and in the pre-internet world the adverts were never delivered to us personally based on the data trails we leave behind largely unwittingly.
The internet changed forever the connection between advertising and entertainment as our data trails are gathered up by the ad-tech industry and used to micro-target messages in a much more effective way than previous mass-media platforms ever did. The gold rush of the ad-tech world is such that digital advertising has now overtaken TV advertising in many major markets. Where next?
Many in the know have been warning us of the dark side of why so many tech giants give us a great product for free (Facebook, Twitter, Instagram, Snapchat, Google, YouTube and so on). There have been multiple warnings that our behavioural data, our likes, our preferences, personal attributes and even our friends’ data, is being used to influence us unwittingly. However, we shrug our shoulders and carry on in the belief that the value exchange is a fair one – after all, we don’t want to pay to use Facebook and Google do we?
But not anymore, now that we all know that our data is being used for darker motives than persuading us to buy things. It is being used to persuade us who to vote for – and not with facts, or argument, but with lies and “fake news”. A line is being crossed and the backlash is beginning. A 15% drop in Facebook’s value so far will be followed by declining engagement, user churn, increased privacy regulation and potentially massive fines. The era of loose privacy regulations and the resulting advertiser funded tech giants has just had a glimpse of its own funeral.
The Future is Web 3.0
Now that the curtain has been pulled back, Oz-like, to reveal the truth to the masses, the relationship between advertising and content & services will continue to crumble. And why not? Why should advertising be what pays for content & services when the advertising is dishonest, or based on dubiously obtained or fake data? The fairness of the value exchange is now in doubt, and with it the fortunes of the businesses that depend on it.
The good news is that the weakening of the advertising model that has led to the giant platforms of Facebook, Twitter and Google, will speed up the adoption of Web 3.0. This next stage of the internet will see a more open and transparent approach, together with decreasing dominance of the giant tech platforms. This is being driven by a desire for greater privacy and control over users’ internet activity characterised by direct peer-to-peer activity outside of the control of the giants. In essence, we get the internet back! Web 3.0 is being formed, but it will enable new content & services to emerge which will not require advertising to dominate the funding. Direct relationships between creators and consumers will flourish resulting in content & services built collaboratively with new value exchanges driven by transactions and human activity rather than the dark arts of persuasion.
What does this mean for the Media & Entertainment industries?
The good news is that the likely collapse in mass media advertising (eg TV broadcasting) may be suspended for a while longer as its position as the only trusted (albeit imperfect) route to reach mass audiences is strengthened by the impending privacy backlash engulfing the tech giants.
However, don’t let the stay of execution of the existing model prevent the development of new content and models less reliant on advertising. Now is the time for the incumbent media and entertainment industries to double down on developing content and new value exchange models fit for purpose in a Web 3.0 world. These models will be based on building communities of consumers, or “tribes”, around new content through a greater focus on peer-to-peer and other technologies as they emerge. Consumer loyalty, “fandom”, propensity to pay and transact, and to recommend to others to build content communities, will all be increased by giving core fans more immersive experiences and greater involvement with the content and creators they love. The old model of content paid for up-front, without knowing whether it will work or not, will give way to new models where content requires investment and builds audiences, communities and value over time. The creation of such models requires a significant leap away from the comfort of the current advertising dominated media and entertainment industry – it won’t be for the complacent and risk-averse, but the passionate innovators and entrepreneurs out there will already have sniffed the opportunity that Facebook’s woes present. Now it gets personal.